First Quarter 2024 Highlights: Net income available to common shareholders of $11.7 million, or $0.53 per diluted share Pre-tax, pre-provision earnings of $32.2 million Tangible book value per share increased 0.4% from prior quarter to $23.44 Common equity tier 1 capital ratio improved to 8.60% from 8.40% Net interest margin of 3.18%, compared to 3.21% in prior quarter Efficiency ratio of 58.0%, compared to 55.2% in prior quarter EFFINGHAM, Ill., April 25, 2024 (GLOBE NEWSWIRE) -- Midland States Bancorp, Inc. (NASDAQ:MSBI) (the "Company") today reported net income available to common shareholders of $11.7 million, or $0.53 per diluted share, for the first quarter of 2024, compared to $18.5 million, or $0.84 per diluted share, for the fourth quarter of 2023. This also compares to net income available to common shareholders of $19.5 million, or $0.86 per diluted share, for the first quarter of 2023. Provision expense was $14.0 million in the first quarter of 2024 compared to $7.0 million and $3.1 million in the fourth and first quarters of 2023, respectively. The increase in provision expense was the result of a specific reserve of $8.0 million on a multi-family construction project. Financial results for the fourth quarter of 2023 included a $1.1 million gain on the sale of shares of VISA B stock, offset by $2.9 million of losses on the sale of investment securities. Results for the first quarter of 2023 included $0.6 million of losses on the sale of investment securities. There were no adjustments to the financial results for the first quarter of 2024. Excluding these transactions, adjusted earnings available to common shareholders were $19.8 million and $20.0 million, or $0.89 and $0.88 per diluted share, for the fourth and first quarters of 2023, respectively. Jeffrey G. Ludwig, President and Chief Executive Officer of the Company, said, "Our first quarter reflects strong pre-tax, pre-provision results and our ongoing ability to deliver increased fee income and strong expense control. While our pre-tax pre-provision results generate solid profitability we did increase our reserves to reflect an increase in nonperforming loans. Our continued success in executing on our balance sheet management strategies resulted in the improvement in our loan-to-deposit ratio, tangible book value per share, and all of our capital ratios improved in the first quarter, even after the additional provision for credit losses. "We continue to focus on high quality commercial relationships and our conservative approach to new loan production, including through the intentional runoff of equipment finance and consumer loans. We also continue to have success in growing our wealth management business, which contributed to the increase we had in non-interest income in the first quarter. "As always, we continue to operate with a long-term perspective, and while we will maintain disciplined expense control, we will continue to invest in areas such as banking and wealth talent and technology that we believe will further strengthen our franchise and enhance our ability to continue creating long-term value for our shareholders," said Mr. Ludwig. Balance Sheet Highlights Total assets were $7.83 billion at March 31, 2024, compared to $7.87 billion at December 31, 2023, and $7.93 billion at March 31, 2023. At March 31, 2024, portfolio loans were $5.96 billion, compared to $6.13 billion at December 31, 2023, and $6.35 billion at March 31, 2023. Loans During the first quarter of 2024, outstanding loans declined by $172.6 million, or 2.8%, from December 31, 2023, as the Company continued to originate loans in a more selective and deliberate approach to balance liquidity and funding costs. Increases in commercial FHA warehouse lines and construction and land development loans of $8.0 million and $21.5 million, respectively, were offset by decreases in all other loan categories. Equipment finance loan and lease balances decreased $54.5 million during the first quarter of 2024 as the Company continued to reduce its concentration of this product within the overall loan portfolio. Consumer loans decreased $98.1 million due to loan payoffs and a cessation in loans originated through GreenSky. Our Greensky-originated loan balances decreased $77.7 million during the first quarter to $606.0 million at March 31, 2024. In addition, as previously disclosed, during the fourth quarter of 2023, the Company ceased originating loans through LendingPoint. As of March 31, 2024, the Company had $112.7 million in loans that were originated through LendingPoint, which will continue to be serviced by LendingPoint.   As of   March 31,   December 31,   September 30,   June 30,   March 31, (in thousands) 2024   2023   2023   2023   2023 Loan Portfolio                   Commercial loans $ 913,564   $ 951,387   $ 943,761   $ 962,756   $ 937,920 Equipment finance loans   494,068     531,143     578,931     614,633     632,205 Equipment finance leases   455,879     473,350     485,460     500,485     510,029 Commercial FHA warehouse lines   8,035     —     48,547     30,522     10,275 Total commercial loans and leases   1,871,546     1,955,880     2,056,699     2,108,396     2,090,429 Commercial real estate   2,397,113     2,406,845     2,412,164     2,443,995     2,448,158 Construction and land development   474,128     452,593     416,801     366,631     326,836 Residential real estate   378,583     380,583     375,211     371,486     369,910 Consumer   837,092     935,178     1,020,008     1,076,836     1,118,938 Total loans $ 5,958,462   $ 6,131,079   $ 6,280,883   $ 6,367,344   $ 6,354,271                               Loan Quality Overall, credit quality metrics declined this quarter compared to the fourth quarter of 2023. Non-performing loans increased $48.6 million to $105.0 million at March 31, 2024, compared to $56.4 million as of December 31, 2023. Four loans totaling $47.4 million account for the increase. Of these, three loans totaling $40.8 million are multi-family construction or multi-family projects. Loans 30-89 days past due decreased $23.9 million to $58.9 million as of March 31, 2024, compared to prior quarter end, as loans totaling $25.1 million were transferred to nonperforming status. At March 31, 2023, loans 30-89 days past due totaled $30.9 million, non-performing loans were $50.7 million, and non-performing assets as a percentage of total assets were 0.74%.   As of and for the Three Months Ended (in thousands) March 31,   December 31,   September 30,   June 30,   March 31, 2024   2023   2023   2023   2023 Asset Quality                   Loans 30-89 days past due $ 58,854     $ 82,778     $ 46,608     $ 44,161     $ 30,895   Nonperforming loans   104,979       56,351       55,981       54,844       50,713   Nonperforming assets   116,721       67,701       58,677       57,688       58,806   Substandard loans   149,049       184,224       143,793       130,707       99,819   Net charge-offs   4,445       5,117       3,449       2,996       2,119   Loans 30-89 days past due to total loans   0.99 %     1.35 %     0.74 %     0.69 %     0.49 % Nonperforming loans to total loans   1.76 %     0.92 %     0.89 %     0.86 %     0.80 % Nonperforming assets to total assets   1.49 %     0.86 %     0.74 %     0.72 %     0.74 % Allowance for credit losses to total loans   1.31 %     1.12 %     1.06 %     1.02 %     0.98 % Allowance for credit losses to nonperforming loans   74.35 %     121.56 %     119.09 %     118.43 %     122.39 % Net charge-offs to average loans   0.30 %     0.33 %     0.22 %     0.19 %     0.14 %                                         The Company continued to increase its allowance for credit losses on loans during the first quarter of 2024. Notably, the Company recorded a specific reserve of $8.0 million on one large construction and land development loan. The allowance totaled $78.1 million at March 31, 2024, compared to $68.5 million at December 31, 2023, and $62.1 million at March 31, 2023. The allowance as a percentage of portfolio loans was 1.31% at March 31, 2024, compared to 1.12% at December 31, 2023, and 0.98% at March 31, 2023. Deposits Total deposits were $6.32 billion at March 31, 2024, compared with $6.31 billion at December 31, 2023, representing an increase of $14.5 million, primarily due to increases in noninterest bearing demand deposits and brokered time deposits, which were partially offset by seasonal outflows of servicing and public fund deposits. Noninterest-bearing deposits increased $67.0 million to $1.21 billion at March 31, 2024, while interest-bearing deposits decreased $52.5 million to $5.11 billion at March 31, 2024. Brokered time deposits increased $93.7 million to offset seasonal outflows of the servicing and public fund deposits.   As of   March 31,   December 31,   September 30,   June 30,   March 31, (in thousands) 2024   2023   2023   2023   2023 Deposit Portfolio                   Noninterest-bearing demand $ 1,212,382   $ 1,145,395   $ 1,154,515   $ 1,162,909   $ 1,215,758 Interest-bearing:                   Checking   2,394,163     2,511,840     2,572,224     2,499,693     2,502,827 Money market   1,128,463     1,135,629     1,090,962     1,226,470     1,263,813 Savings   555,552     559,267     582,359     624,005     636,832 Time   845,190     862,865     885,858     840,734     766,884 Brokered time   188,234     94,533     119,084     72,737     39,087 Total deposits $ 6,323,984   $ 6,309,529   $ 6,405,002   $ 6,426,548   $ 6,425,201                               Results of Operations Highlights Net Interest Income and Margin During the first quarter of 2024, net interest income, on a tax-equivalent basis, totaled $56.1 million, a decrease of $2.1 million, or 3.6%, compared to $58.3 million for the fourth quarter of 2023. The tax-equivalent net interest margin for the first quarter of 2024 was 3.18%, compared with 3.21% in the fourth quarter of 2023. Net interest income and net interest margin, on a tax-equivalent basis, were $60.7 million and 3.39%, respectively, in the first quarter of 2023. The declines in the net interest income and margin were largely attributable to increased market interest rates resulting in the cost of funding liabilities increasing at a faster rate than the yield on earning assets, as well as the impact of interest reversals on loans placed on non-accrual. Average interest-earning assets for the first quarter of 2024 were $7.11 billion, compared to $7.20 billion for the fourth quarter of 2023. The yield decreased 2 basis points to 5.76% compared to the fourth quarter of 2023. Interest-earning assets averaged $7.26 billion for the first quarter of 2023. Average loans were $6.01 billion for the first quarter of 2024, compared to $6.20 billion for the fourth quarter of 2023 and $6.32 billion for the first quarter of 2023. The yield on loans was 5.99% and 6.00% for the first quarter of 2024 and the fourth quarter of 2023, respectively. Investment securities averaged $988.7 million for the first quarter of 2024, and yielded 4.36%, compared to an average balance and yield of $883.2 million and 4.16%, respectively, for the fourth quarter of 2023. The Company purchased additional higher-yielding investments resulting in the increased average balance and yield. Investment securities averaged $809.8 million for the first quarter of 2023. Average interest-bearing deposits were $5.20 billion for the first quarter of 2024, compared to $5.30 billion for the fourth quarter of 2023, and $5.05 billion for the first quarter of 2023. Cost of interest-bearing deposits was 3.04% in the first quarter of 2024, which represented an 11 basis point increase from the fourth quarter of 2023. A competitive market, driven by rising interest rates and increased competition, contributed to the increase in deposit costs.   For the Three Months Ended   March 31,   December 31,   March 31, (dollars in thousands)  2024     2023    2023  Interest-earning assets Average Balance   Interest & Fees   Yield/Rate   Average Balance   Interest & Fees   Yield/Rate   Average Balance   Interest & Fees   Yield/Rate Cash and cash equivalents $ 69,316   $ 951   5.52 %   $ 77,363   $ 1,054   5.41 %   $ 85,123   $ 980   4.67 % Investment securities   988,716     10,708   4.36       883,153     9,257   4.16       809,848     5,995   3.00   Loans   6,012,032     89,489   5.99       6,196,362     93,757   6.00       6,320,402     87,997   5.65   Loans held for sale   3,405     55   6.56       4,429     81   7.26       1,506     16   4.41   Nonmarketable equity securities   35,927     687   7.69       41,192     715   6.89       47,819     795   6.75   Total interest-earning assets $ 7,109,396   $ 101,890   5.76 %   $ 7,202,499   $ 104,864   5.78 %   $ 7,264,698   $ 95,783   5.35 % Noninterest-earning assets   671,671             695,293             610,811         Total assets $ 7,781,067           $ 7,897,792           $ 7,875,509                                             Interest-Bearing Liabilities                                   Interest-bearing deposits $ 5,195,118   $ 39,214   3.04 %   $ 5,295,296   $ 39,156   2.93 %   $ 5,053,941   $ 26,405   2.12 % Short-term borrowings   65,182     836   5.16       13,139     15   0.47       38,655     25   0.26   FHLB advances & other borrowings   313,121     3,036   3.90       430,207     4,750   4.38       540,278     6,006   4.51   Subordinated debt   93,583     1,280   5.50       93,512     1,281   5.43       99,812     1,370   5.57   Trust preferred debentures   50,707     1,389   11.02       50,541     1,402   11.00       50,047     1,229   9.96   Total interest-bearing liabilities $ 5,717,711   $ 45,755   3.22 %   $ 5,882,695   $ 46,604   3.14 %   $ 5,782,733   $ 35,035   2.46 % Noninterest-bearing deposits   1,151,542             1,142,062             1,250,899         Other noninterest-bearing liabilities   121,908             108,245             74,691         Shareholders' equity   789,906             764,790             767,186         Total liabilities and shareholder's equity $ 7,781,067           $ 7,897,792           $ 7,875,509                                             Net Interest Margin     $ 56,135   3.18 %       $ 58,260   3.21 %       $ 60,748   3.39 %                                     Cost of Deposits         2.49 %           2.41 %           1.70 %                                           (1)   Interest income and average rates for tax-exempt loans and investment securities are presented on a tax-equivalent basis, assuming a federal income tax rate of 21%. Tax-equivalent adjustments totaled $0.2 million for each of the three months ended March 31, 2024, December 31, 2023 and March 31, 2023, respectively. Noninterest Income Noninterest income was $21.2 million for the first quarter of 2024, compared to $20.5 million for the fourth quarter of 2023. Noninterest income for the first quarter of 2024 included incremental servicing revenues of $3.7 million related to the Greensky portfolio. Noninterest income for the fourth quarter of 2023 included incremental servicing revenues of $2.2 million and $1.6 million related to our commercial FHA servicing portfolio and the Greensky portfolio, respectively. Also included was a $1.1 million one-time gain from the sale of Visa B stock, offset by $2.9 million of losses on the sale of investment securities. The first quarter of 2023 included $0.6 million of losses on the sale of investment securities. Excluding these transactions, noninterest income for the first quarter of 2024, the fourth quarter of 2023, and the first quarter of 2023 was $17.5 million, $18.5 million, and $16.4 million, respectively.   For the Three Months Ended   March 31,   December 31,   March 31, (in thousands) 2024   2023   2023 Noninterest income           Wealth management revenue